Mumbai, 10 Sep (Commoditiescontrol): Cotton futures experienced a rough weather for the week ended September 8th, as clouds of demand uncertainty from the key buyer China dampened the trader sentiment while strong dollar made buying natural fiber expensive.
It was a double whammy for ICE cotton futures, which led the prices dropping to their lowest level in more than two weeks. However, some bargain buying lent support. As a result, on Friday, ICE Cotton contracts for December ended at 85.91 cents, up 53 cents. March closed at 86.09 cents, 53 cents higher. May settled at 86.28 cents, adding 55 cents. Dec finished the week with a loss of 404 cents or 4.5%, the first weekly dip in three.
During the month of August, Dec futures saw a 558 point range and a net 310 point gain. The contract posted their third straight monthly gain.
The overall strength in the dollar, the greenback recorded its longest weekly winning streak since 2014, along with concerns over demand from top buyer China have caused this cotton price decline.
The dollar hit a two-week high, making cotton more expensive for holders of other currencies. China's onshore yuan slid to a 16-year low versus the greenback, under pressure from a property slump, weak consumer spending and shrinking credit growth in the world's second-largest economy.
Bearish economic data from China, the top buyer of U.S. cotton, and a rising dollar are proving to be a "double whammy" for cotton, analysts said.
A positive update from the USFDA at export front helped limit the losses. The weekly export sales data showed 85,093 RBs of cotton was sold during the week ended Aug 31. That was up from 61,000 RBs last week but was only 37% of the same week last year. Mexico and Costa Rica were the week’s top buyers. Cotton exports came in at 175,351 RBs for a season total of 924,911 RBs. That trails last year’s pace by 27%.
On the Crop front, the Crop Progress data from Tuesday indicated 32% of the cotton crop with bolls open, 1% below the average pace. Condition ratings were down 1% at 31% gd/ex, as the Brugler500 was actually up 5 points to 276, as poor/very poor ratings were down 3% to 41%.
The NOOA’s updated 7-day QPF has rain in Texas through Kansas, which may stall harvest. Mississippi and Georgia will remain dry, with limited rainfall for Alabama.
USDA’s weekly Classings summary showed 141,922 bales were classed in Texas for a season total of 531,866 bales. No other states have begun submitting sufficient data.
The weekly Cotton Market Review from USDA had 11,118 bales sold during the week for an average price of 81.72 cents. The Cotlook A Index fell back 160 points to 97.40 cents/lb for Sept 7. The updated AWP for cotton was 73.55 cents/lb, up by 199 points from last week. ICE Certified Stocks were 2,352 bales.
The weekly CFTC Commitment of Traders data, on Friday, revealed cotton spec traders were net new buyers during the week that ended Sept 5. The 12,000 new longs in addition to the 1,700 fewer spec shorts left the group at a yearly high 52,200 contract net long. The commercial cotton traders opened more short hedges than long hedges and extended their net short by 14,500 contracts to 103,410.
Cotton slipped back away from the 90 cent mark on demand concern, but that can be a minor concern given the strength in crude oil prices. That should make buying man-made fiber costly and hence some buying in natural fiber is likely to sip in. Hence, there's positive bias in the market movement going forward.
For Monday, support for the December Cotton contract is at 85.21 cents and 84.50 cents, with resistance at 86.63 cents and 87.34 cents.
(By Commoditiescontrol Bureau: 09820130172)
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